In response to COVID-19, Congress passed several bills in 2020 to provide business relief. Congress sent additional funding to states specifically for child care (e.g., to help with the costs of PPE and cleaning supplies, and to provide grants for temporary stabilization support).
Congress also created new forms of relief for businesses, particularly small businesses such as child care. This funding is available in grants, loans, and tax credits. This page provides information for child care centers about options to consider as child care center-based businesses face the economic impact of COVID-19. A similar page of business relief options for family child care homes is located here.
As part of the CARES Act enacted in March 2020, Congress created a new business relief program, the Paycheck Protection Program (referred to as PPP). This is a "forgivable loan" - in other words, a grant - if the use of the loan complies with eligible spending for the money.
In general, this means at least 60% of the funds are used for payroll related costs and 40% for fixed costs such as mortgage interest, rent, utilities, software used for your business (e.g., for record-keeping or supporting other business operations), perishable goods (such as food costs), expenses for PPE, cleaning supplies, and other expenses related to social distancing and public health requirements related to COVID.
In December, Congress passed legislation that separated the PPP program into two programs.
Below are resources to learn more about First and Second PPP forgivable loans.
Recorded Webinar. An Overview of the Paycheck Protection Program and Economic Injury Disaster Loan Opportunities for Child Care Centers (First Children's Finance, January 19, 2021. This is a 90 minute webinar.)
Links to SBA PPP resources:
COVID-19 Economic Injury Disaster Loans. The U.S. Small Business Administration offers low interest loans to small businesses, including child care centers. Unlike the PPP program, the Economic Injury Disaster Loans (referred to as EIDL) are not forgivable. The interest rate for tax-paying (for-profit) child care centers is 3.75%. The interest rate for nonprofit child care centers is 2.75%. Payments are deferred for one year (although interest accrues). The loan is for 30 years, but can be paid back sooner if the borrower chooses to do so.
Targeted EIDL Advance funds of up to $10,000 (which are grants, not loans) are available to businesses located in low-income communities that previously received an EIDL Advance for less than $10,000, or those that applied but received no funds due to lack of available program funding. Applicants may qualify if they:
Applicants do not need to take any action at this time. The SBA will reach out to those who qualify.
Employee Retention Tax Credit. For child care centers, you may also qualify for an employee retention tax credit. Read this one pager on the Employee Retention Tax Credit and talk to your tax preparer to see if you can claim this tax credit. You can also back-claim it. Under the federal CARES Act enacted in March 2020, businesses had to choose between receiving a PPP forgivable loan OR taking the employee retention tax credit. A federal law enacted in December 2020 allows businesses to use both. Read the one page explainer to find out how. The tax credit was scheduled to expire on June 30, however, the American Rescue Plan enacted on March 11, 2021 extends the credit through December 31, 2021.
Coronavirus-Related Paid Leave for Workers and Tax Credits for Small- and Mid-Size Businesses.
The Families First Coronavirus Response Act (FFCRA) was enacted in March of 2020. This law required businesses to provide 2 weeks of paid sick leave and up to 10 weeks of paid family leave for eligible employees through the end of December 2020. Employers with fewer than 50 employees were allowed to request an exemption. Employers were allowed to offset the cost of the leave through tax credits (i.e., employers paid the leave out of payroll taxes that otherwise would have been deposited with the IRS).
In December, Congress passed a major COVID relief bill, which included an extension of the employer tax credits through March 31, 2021. However, the requirement for employers to provide the leave was not extended (e.g., employees are not entitled to the paid leave). What this means is that employers can voluntarily provide paid leave, which they would be allowed to take tax credits for, but no individuals are entitled to such leave. The paid leave tax credits expire March 31, 2021 (unless extended by Congress). It is also possible that Congress could restore the entitlement to paid leave for employees.
In December 2020, Congress passed a major COVID relief bill, which included an extension of the employer paid leave tax credits through March 31, 2021. However, the requirement for employers to provide the leave was not extended (e.g., employees are not entitled to the paid leave). What this means is that employers can voluntarily provide paid leave, which they would be allowed to take tax credits for, but no individuals are entitled to such leave. The paid leave tax credits were extended through September 30, 2021 by the American Rescue Plan enacted on March 11, 2021. The entitlement to employee paid sick leave was not restored. However, for calendar quarters after March 31, 2021, the clock resets for employee sick leave (e.g., regardless of the number of sick days of paid leave for which an employee previously used and an employer claimed a tax credit for, the clock is reset after March 31, 2021 for an additional 10 days. Also, the credit is expanded to cover the time an employee takes leave to receive a COVID-19 vaccine and any time needed to recover from any vaccine adverse conditions (if they occur). Unless extended by Congress, the paid sick and family leave tax credits expire on September 30, 2021.
Congress responded to COVID-19 by passing legislation to broaden the safety net for individuals and families. Federal legislation was enacted in March 2020 and in December 2020. In March, Congress created the Pandemic Unemployment Assistance (PUA) program for individuals who typically are excluded from state unemployment compensation programs. Also, Congress provided a weekly supplement for individuals receiving state unemployment or PUA benefits. The supplement of $600 per week ended July 31, 2020.
In December 2020, legislation was enacted to extend the PUA program through March 14, 2021. The $600 weekly supplement that expired in July was reduced to $300 per week and extended through March 14, 2021. The American Rescue Plan enacted on March 11, 2021 extends unemployment compensation, including the $300 weekly supplement, through September 6, 2021.
Return to Work Reporting. Under the December 2020 law, every state is required to have a process in place to address situations that involve individuals who are receiving unemployment and who refuse to return to work or refuse to accept an offer of suitable employment without good cause.
Have you heard about NJ's Shared Work Program? The basic concept behind the program is to help employers retain employees (e.g., the program helps employers avoid laying off employees and/or helps them to scale back up in a back-to-work effort).
In general, for employees, instead of being laid off, they would typically work a reduced set of hours per week. In return, they would receive a percentage of their unemployment compensation. For example, if an employee typically works 40 hours per week and his/her hours are reduced to 32 hours per week (a 20% reduction), then the employee would receive reduced earnings based on the 32-hour week and 20% of his/her unemployment compensation. For employers, reducing hours instead of imposing layoffs can help retain a skilled workforce during recovery periods. The same concept can also be applied for employers seeking to restore their workforce. While NJ's state law restricts the workshare program to employers with at least 10 employees, it is an option that some child care centers may want to consider. Find out more about NJ's Workshare program on the NJ Labor and Workforce site here. State workshare programs that have been enacted through state legislation are funded 100% by federal dollars through September 6, 2021.
COVID-19 Child Care Information
Let the IRS help you determine if your business is likely to qualify for one or more of the tax relief options currently available.
Some allow for an immediate dollar-for-dollar tax offset against payroll taxes to help pay for employee sick leave and some are designed to help keep employees on your payroll (such as the Employee Retention Tax Credit)
All you need to do is answer a few questions. It should take less than 5 minutes.
Quick Resource Links
Dept. of Labor:
Links to Internal Revenue Service
Forms & Material
IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19 (Form and Instructions)
IRS Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund (Form and Instructions)
NJ Department of Labor and Workforce Development Division of Employer Accounts, Easy Access Tool
Businesses can now use the Employer Access application (formerly called TWES) to: